Examination of Witnesses

Water Bill – in a Public Bill Committee am 12:00 pm ar 3 Rhagfyr 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Trevor Bishop and Pete Fox gave evidence.

Photo of Linda Riordan Linda Riordan Llafur, Halifax

Will the new witnesses please identify themselves for the Committee?

Pete Fox: My name is Pete Fox, I am head of strategy and investment for flood and coastal risk management in the Environment Agency.

Trevor Bishop: Good afternoon. My name is Trevor Bishop, I am head of water resources at the Environment Agency.

Q 120

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

I draw the Committee’s attention to my declaration of interest, in that I hold two abstraction licences.

The Government have recently confirmed that they will seek to amend clause 1, which requires Ofwat to consult the EA over abstraction licences. Will you outline roughly the circumstances in which you might object to an abstraction licence?

Trevor Bishop: We operate a series of tests regarding an application for an licence. First, is there proof of legitimate need? If people apply for a licence on a speculative basis, they are locking up resources that could be used for economic growth or other aspects, so that is quite important. Is it efficient, in terms of the efficient and proper use of water, which is part of our duties under the Water Resources Act 1991? Would it have a negative effect on any other abstractor and is it sustainable with regard to environmental duties? Those are the three principal tests and we would object if it failed one of those.

Q 121

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

Would you seek, or do you think you should have the right, to veto any current abstraction licence?

Trevor Bishop: We grant licences, so we have the power to grant or not grant licences subject to those tests. Ofwat is not looking for the power to grant licences; what Ofwat may do, with upstream competition and also, I think, with clause 12, is encourage or even force bulk transfers of water between participants, and that could affect the use of an abstraction licence. If it does so, we would need to be consulted, because a change of use in an abstraction licence could cause a problem for another abstractor downstream by using more water, or it could actually affect the water framework directive. It is important that we are able to protect against deterioration.

Q 122

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

What differences do you identify between those who are abstracting from a watercourse and those who are abstracting from an aquifer below ground? Which is the best one to abstract from, to be blunt?

Trevor Bishop: It depends on the uniqueness of the situation. We would apply exactly the same tests to both. We generally find that if you take water from a river, if it is going to have an effect that effect is immediate on the environment and on downstream abstractors,. With groundwater, we tend to find that the effect is delayed, because when you take water from below ground there is a lot of storage which is removed  before the effect is seen. So it generally takes a little more science and investigation to make sure that we understand what consequences may be involved in that licence.

Q 123

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

At times of high water flow, why do you not encourage abstraction to assist? What are you doing to twist that on its head, if you like?

Trevor Bishop: Very much so. About a third of the country has now fully utilised its water resource in terms of year-long abstractions and that is why we are increasingly encouraging people who want to use water to take it at times of high flows and where they can store that water for when there is a deficit in supply. There are certain ways we can encourage and incentivise that. We have recently worked with the farming community to give them advice on storage reservoirs, winter storage reservoirs and so on.

Q 124

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

Clause 41 basically aims to tackle over-abstraction by removing the right to compensation—you can withdraw a licence without having to pay compensation. The EA has estimated that about 40% of licence-abstracted volume is not being used. If you go down that route, how many of those sleeping licences might suddenly pop up?

Trevor Bishop: First, clause 41 allows us not to pay compensation to water companies only. For all other types of abstraction, whether it is food, energy, goods and services or growth, we will still be required to pay compensation. It is only for water companies, and it will only apply when the licence fails one of those tests. Many licences were granted up to 50 years ago, and the environmental standards that we wanted to achieve from our legislation were different then. As the environmental agenda has increased, some licences have become unsustainable, whether under the habitats directive, which is statutory, or due to local concerns and issues. About 2% to 4% of the 21,500 licences are unsustainable as they stand. In what we call our RSA programme, we go through a process with the abstractor to understand the consequences of taking the licence away and whether there is genuine evidence to prove that there is damage. Very often we find that there is no evidence, and we all walk away.

Q 125

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

Can you give the Committee a bit more detail about the compensation packages? If you withdraw a licence from an abstractor, how far can the compensation go? If you withdrew it from someone who is producing a crop that is of a small size, you could put a value on the crop at that point, but you could also put a value on its market value at the end of the process in eight or nine months’ time.

Trevor Bishop: In the majority of cases we have changed the licences through voluntary negotiations with farmers and individuals. We have looked at the evidence, seen its impact and assessed the value of the licence and whether we can come to an arrangement. When we cannot, we unfortunately end up in a litigious situation, which has only happened a couple of times so far, and an independent planning inspector will adjudicate a hearing to understand what the right level of compensation is. Some people have built their businesses  and livelihoods around abstractions, so when we are required to take that small number of licences away, we do not do it lightly.

Q 126

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

If somebody over-abstracts, what sort of teeth have you got to counter that?

Trevor Bishop: We have sections 51 and 52 of the Water Resources Act 1991, which require us to take licences away, but we must go through a process whereby the individual is able to claim compensation. Clause 41 is incredibly important because we simply do not have the financial resources to do that for the water industry. Clause 41 means that it is far more effective for customers’ affordability and the environment, because instead of us paying water companies a lump sum of cash at the end of an agreement, the claim would go through the planning process and we would often find the least costly solution for the loss of the licence to the water company. It really is a very good option for everyone involved.

Q 127

Photo of Mark Spencer Mark Spencer Ceidwadwyr, Sherwood

Finally, how do you regard fracking, and how will you guard against over-abstraction in that industry?

Trevor Bishop: The fracking industry obviously uses fairly new technology. We have not seen a great deal of onshore oil exploration in England historically. Potentially, fracking could be many orders of magnitude greater than what we have seen historically, and a different process. We are working with the fracking industry to understand it. We have found that if fracking takes off moderately above the high-level scenario that is planned it would probably increase UK abstraction for the environment by 0.2 of 1%. That sounds like a very small percentage, and it is, but locally there could be issues. We are working with the industry to find out to what extent it could recycle the water on site to reduce its demand for water, particularly if it plans to do fracking in areas that are already water-stressed and where there is already environmental damage due to historical over-abstraction.

Q 128

Photo of Pat Glass Pat Glass Llafur, North West Durham

Have the new flood maps been delayed?

Pete Fox: The requirements of the flood risk regulations are that the flood maps are published in December this year, and we are on course to publish them this month.

Q 129

Photo of Pat Glass Pat Glass Llafur, North West Durham

So we can expect them by 31 December?

Pete Fox: Yes.

Q 130

Photo of Pat Glass Pat Glass Llafur, North West Durham

They would be really useful as we scrutinise the Bill, so when in December? We are likely to be finished by Christmas.

Pete Fox: It is a date set by DEFRA. My understanding is that it is very soon.

Q 131

Pete Fox: Yes.

Q 132

Photo of Roger Williams Roger Williams Democratiaid Rhyddfrydol, Brycheiniog a Sir Faesyfed

To what accuracy are the maps going to be published? I have had some difficulty locally because a map was produced that led to quite a lot of concern, and we were told by the Environment Agency that it was not going to do the most accurate ones because few houses were involved.

Pete Fox: The maps that we publish do not go to property level, so they do not identify individual properties. The level of accuracy is determined in part by the amount of building in an area. The intention is to provide as much accuracy as we can. We are striving to improve accuracy all the time.

Q 133

Pete Fox: It depends on the amount of modelling information that we have for a particular area. When we prepare a proposal for a flood defence scheme, we will go into quite detailed modelling to provide an accurate assessment of the benefits accruing from an investment in flood defences. In that case, we may well have maps that are down to property level, but across the whole country, we cannot guarantee that level of accuracy, I am afraid. There is some variance.

Q 134

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

Just returning quickly to the bulk supply licences, the Government have already said that they are going to bring forward a new clause to deal with the issue of people entering the market as new suppliers. Presumably these bulk water transfers will come from people who are already suppliers—I think that is the thought. There is also some thought from Government that there is a need for the Environment Agency to look at the scale of those water transfers, because who knows what might happen in the area where it is being abstracted from? Has the Environment Agency any thoughts on that? Do you think that that would be a good thing to be able to do?

Trevor Bishop: Yes, I believe an amendment may already have been tabled to ensure that Ofwat will consult the Environment Agency. That is important to ensure environmental protection and protection of other abstractors. The vast weight of evidence is that there is not a latent demand for water to be released and therefore we are not likely to see a significant increase in abstraction; it will be a redistribution of abstraction. Because so much of the country is already fully utilised, what you do not want to do is redistribute to areas where there is already stress on the environment and other abstractors.

It is also important in the clause that water is a closed market, so water companies will only be able to share between water companies or other inset appointments. That is very important, because water companies also have responsibilities under the deterioration in the water framework directive. They have duties to make sure that they act properly and with due regard for society, the environment and people in this respect.

Q 135

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

Does the arrangement that you see in the amendment give you any teeth or are you merely advisory to Ofwat? Would you expect Ofwat always to take your advice, or do need to have powers to impose it?

Trevor Bishop: No, we do not need powers, because we already have them under the Water Resources Act 1991 to take those licences away. Because we do not need to pay compensation, which will be dealt with through the planning process, we have a back-up position that we are not constrained by financial availability; we follow through a very streamlined process which would be far more affordable for customers as well.

Q 136

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

Finally, it seems to me there is quite a lot of new work for you in here. I am involved with the Environment Agency in other areas where they are always pleading poverty. Do you have the resources to be able to deal with this new level of work?

Trevor Bishop: Yes, we do. You will be aware that grant in aid to the Environment Agency is being reduced. We need to be a more efficient organisation, so we are moving from three tiers to being a two-tier organisation; we will be locally based with just a national interface.

What is also important with regard to water resources is that they are funded through charges and fees as opposed to any other income, so that figure is flatlined for a number of years and is not currently being reduced.

Q 137

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

Returning to the fracking exchange that we had slightly earlier on, I am not an expert, but my understanding of some of the correspondence I have seen from my and other MPs’ constituents that there is concern that if fracking goes wrong, it may pollute the water table. From your nod, Mr Bishop, you are vaguely aware of what I am trying to get to. Given that this is an emergent technology, is the Environment Agency or DEFRA having discussions with DECC about who should pay the compensation if that goes wrong?

Trevor Bishop: I could answer your question right up to the point where you said, “Who pays compensation?” which I am afraid I am not in a position to answer. We are working with DECC and the Health and Safety Executive, which has an important role in ensuring that the design of the well is sufficient to protect both the groundwater and surface water from contamination. We also have responsibilities and duties on the design above ground and ensuring that that is all coherent. I am afraid I cannot help you on the compensation aspect.

Q 138

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

So when you are looking at the licence conditions for fracking, considering how fracking licences should be granted and ensuring that there are robust procedures in the first place, is that one of the things that you are actively looking at?

Trevor Bishop: Very much so. In many respects, a fracking facility is not considerably different from many other industrial processes, such as onshore well site drilling, which we are familiar with; it is about the storage and use of contaminants above ground and the integrity of the well. What is different with fracking is that you are injecting muds into the ground, generally 1, 2, or even 3 or more kilometres down, and the likelihood of those coming up to the surface is absolutely minimal in most situations. Organisations such as the British Geological Survey are reviewing and assessing that risk and making recommendations to DECC, the Environment Agency and other organisations to ensure that this new technology does not introduce a risk that we do not have the tools in the toolkit to deal with. At the moment, we do not believe that that is the case.

Q 139

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

Would it be helpful, Mrs Riordan, if Mr Bishop wrote to us after this to give us something in writing that we could consider?

Trevor Bishop: I would be very happy to do so.

Q 140

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health), Shadow PC Spokesperson (International Development)

Can I just take you a little further on the fracking issue? If you are considering granting an environmental permit for fracking activities in an area that is water-stressed, would you consider the potential necessity of transferring large amounts of water from a water-rich area? To be plain with you, I am thinking about fracking in the north-west of England and the flooded valleys in Wales.

Trevor Bishop: It would not be our duty or responsibility to advise a private company on where to get its water. We would restrict, if appropriate, its access to water in the local environment, and if it chose to transport water by whatever means, we might have a role in that, but that would predominantly be for the operator of that site. For example, if it decided to tanker in water, our only real role—as long as that water was licensed and available where it was extracted and tankered from—stops with the large water resources. We would have an interest where the quality of the water had changed in the fracking process, and in how that was disposed of in the environment or otherwise.

Q 141

Photo of Anne Marie Morris Anne Marie Morris Ceidwadwyr, Newton Abbot

Mr Fox, I think you probably agree that prevention is better than cure. One of our challenges on flooding is ensuring that the Environment Agency is well aware and properly consulted when there will be development and new sites. Can you clarify whether you are happy and content, and if you feel, as a statutory consultee of the Environment Agency, that there is enough consultation through the planning process when a new development is envisaged and at the point of connection? I would also appreciate your thoughts on whether the water companies should be consulted—and should be statutory consultees—during the planning process and at the point of connection. That would ensure that, whenever we have a new development, we would be able to put in place, in a sensible and measured way, appropriate water supply and flood prevention mechanisms.

Pete Fox: Wow; thank you very much for that. We are a statutory consultee and we seek to work very closely with local planning authorities that have responsibility for determining planning applications. We provide them with general information that they can use for all applications. The flood risk maps, which have already been mentioned, will be a fantastic resource for them.

In addition, we provide bespoke advice and views on those applications that we consider to have the greatest flood risk. That is only a small proportion of the total applications made to local authorities but, nevertheless, when we object to an application on flood risk grounds, evidence demonstrates that local authorities take our advice and reject the application in more than 95% of all cases. Responsibility for granting planning permission, however, rests with the local planning authority. I think it is clearly in everybody’s interest to get the best information when making those decisions, so it would be helpful for local planning authorities to take into consideration other information and information from water companies. The actual determination as to whether that happens is a consideration for the Government, but we strongly support the view that local planning authorities should take a full range of information on board when making their decisions.

Q 142

Photo of Neil Parish Neil Parish Ceidwadwyr, Tiverton and Honiton

On coastal flood management and the so-called managed retreat, which I am not a great admirer of because you are often flooding good-quality  land, does the Environment Agency have any figures on how much land nationally will be given up to the sea in the next few years? You do not necessarily have to give the details now, but could we have that in writing?

Pete Fox: I cannot tell you off the top of my head, I am afraid. We have a full suite of shoreline management plans, which are agreed and signed off by the relevant local authorities along the coast, that set out the management options for a range of epochs—eras of time—up and out to 100 years hence. The intention is to provide people who live and work on the coast with some degree of certainty as to how we expect the coast to change over that time period, and what they can expect in protection measures and investment from the public purse. There have been estimates of the likely change locally within shoreline management plans and I will do my best to furnish you with some details on those afterwards.

Q 143

Photo of Matthew Offord Matthew Offord Ceidwadwyr, Hendon

This morning we had the opportunity to put questions to Ofwat about clause 22 and its duty on resilience of supply. It would be useful for us to hear your opinion on that duty. In particular, do you believe that that should be given priority over Ofwat’s second duty of sustainability?

Trevor Bishop: The relative priority is a question for the Government and due process. The drought of 2010 to 2012 really polarised for many people the fact that, in the water resources we plan for in this country, we do not plan for zero risk. That seems obvious, but when you drill down and understand the level of risk that we do plan for, the advice we—Ofwat, ourselves and DEFRA, in joint guidance—give to companies is to plan for the worst drought on record. That is very reasonable, but that means that we have a resilience of only somewhere between one in 60 years and one in 100 years for most of the country. The reality is that, sooner or later, the world will change and we will go outside that situation.

Resilience is therefore really key, because if you work through what would happen if our public water supply system were not to survive a drought situation, the economic and social consequences might be very significant indeed. Whether we have a resilience duty is very much for DEFRA, the Government, Parliament and so on, but certainly the importance of resilience is high in our mind. That is the guidance we get from the Government and others, and I can say that in the latest set of 25-year water resource management plans that we received from all the companies, and audited on behalf of the Government recently, there was no increase in resilience. We are still planning for what is actually quite a modest resilience for water resources.

Q 144

Photo of Matthew Offord Matthew Offord Ceidwadwyr, Hendon

Thank you. It would be useful if you could give any examples of environmental damage happening as a result of the sustainability duty. Do you have any experience or knowledge of that occurring?

Trevor Bishop: Most of the damage due to over-abstraction is because the licences were passed a long time ago. Our expectations and duties with regard to the environment have changed and licences could not keep up with those. I do not think that I can give you any examples of when the current regulatory regime has directly resulted in environmental damage. I think the question is much more about whether we could put  right some of the wrongs of the past more quickly or not. A series of clauses in the Bill aims very much to ensure that both ourselves and Ofwat have the tools to do that job in a way that balances dynamically the needs of people, the economy and the environment together.

Q 145

Photo of Matthew Offord Matthew Offord Ceidwadwyr, Hendon

To press you slightly more on that, do you believe that the Environment Agency should have a veto over Ofwat when environmental damage occurs?

Trevor Bishop: I guess we already do with our ability to curtail abstraction when it is inappropriate to do that. Clauses in the Bill will certainly strengthen that yet again and make it easier for us to act, but we have not got to that situation. The way we work hand in glove with Ofwat, as a fellow regulator, ensures that we do not end up in that situation. That is why, whether it is explicit or implicit, we both operate under the principle of sustainable development, trying to find that dynamic balance.

Q 146

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

In answer to my previous question, you talked about reaching maximum capacity of supply and expressed worries about long-term resilience. I understand that we can do more about loss through the system due to such things as leakage. Is it your opinion that the only way to create greater resilience on the supply side is to increase storage capacity?

Trevor Bishop: No, that is very much not the case. Storage is certainly part of a solution, but as we enter a period in which our climate is likely to get more uncertain, reservoirs are extremely good to deal with differences between wet winters and dry summers, even when you have two dry summers. However, having worked in a water company for a large amount of my career, I know that when you watch a reservoir going down and you end up in a three or four-year drought, they are not so good.

What you need is a mixed portfolio of water resource options: managing down demand; increased storage; and innovative technologies, which could be aquifer storage and recovery, whereby rather than putting water in a reservoir above the ground, you pump it underground into vacant aquifers, or desalination such as Thames Water has done. In the water resource management plans, one of the new things that companies are very much looking at is whether we should use our waste water more in future, and recycle it for non-potable or potable use, to create more of a closed-loop system in our catchments, rather than letting all the water flow to the sea.

Q 147

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

I therefore put it to you that the answer is yes. It is not necessarily just reservoirs—I did not say reservoirs; I said storage capacity. Refilling aquifers is clearly an ideal and wonderful method, as the evaporation is much less, the filtering is better and you get cleaner water out of the bottom. On the use side, I accept that there is a lot we can do through building regulations and so on, but on the supply side, we do need more capacity of one sort or another.

Trevor Bishop: Absolutely. We produced work called “The case for change” in support of DEFRA’s 2011 water White Paper. That showed us that even if we carried out quite exceptional demand management over  the next 20 years, the gap between supply and demand would still exceed capacity, so new supply-side solutions must be required over the next decade.

Q 148

Photo of George Hollingbery George Hollingbery Ceidwadwyr, Meon Valley

I presume you accept that resilience necessarily means redundancy in some way, shape or form, and that therefore there is a cost to consumers. One understands that there is no use having cheap water if there is no water, but is there an understanding at the Environment Agency that that inevitably means that there will be some cost to consumers on that?

Trevor Bishop: Absolutely, and that is why we do not have a high level of resilience today, because if you build a reservoir for a one in 100 year drought, it will sit there being paid for by customers for a large amount of time without ever being used. If you manage demand for water down, there is less redundancy within that option, but there is only so far you can take it. There is a cost to customers in increasing resilience.

Q 149

Photo of Dan Rogerson Dan Rogerson The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

In terms of resilience and management of the resources, and following on from what Mr Hollingbery was saying, if we are storing and increasingly trying to encourage other people to look at ways in which they could do that, would you agree that it would help if it were easier to transfer some of that resource around? That means that if redundancy is built into the system, the water can be used in different ways at different times, depending on where the demand is.

Trevor Bishop: Very much so. One of the difficulties with the way that we manage water resources in this country is that our water supply companies have generally come out of quite small unions around single resources, which have slowly become amalgamated. However, they still operate as relatively discrete units supplying their own customers. We therefore have companies with a surplus in juxtaposition with companies that have a deficit, so the clauses in the Bill that will encourage water to be shared more evenly between those respective areas are helpful. That is very often one of the most cost-effective solutions.

Q 150

Photo of Dan Rogerson Dan Rogerson The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

I was also thinking about in areas, so perhaps water that is not supplied into the mains water supply usually, but is used for other purposes. It is not so much having huge water mains across the whole of the country tying together, but looking at management within each area as well. Is that the sort of thing that could be helped by some of the measures in the Bill?

Trevor Bishop: Very much so. Part of the Bill enables water companies to take water from third parties. Public water supplies are about 40% of the abstraction licences—50% to 60% is used for other means. The interaction between those other third parties, whether they are farmers, energy companies, or goods and services industries, is relatively little. The Bill will potentially enable the use of that water more effectively within catchments, and that has a tremendous advantage. We do not know the size of that market yet. We have all done some work to anticipate it, but I think that market forces will dictate that in the fullness of time.

Q 151

Photo of Dan Rogerson Dan Rogerson The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs

On the concept of the duties—I am sure we will hear a bit more about this with the next panel—is your understanding of resilience just focused on the human part of that triangle you were talking about, or is it also in terms of environmental resilience?

Trevor Bishop: It is resilience for the economy, people and the environment together. The aspiration with elements of this Bill, particularly clause 41, is to ensure that we can get our catchments back to a sustainable balance as quickly, efficiently and cost-effectively as possible, which is really important. Resilience for one has added resilience for those other two components as well.

Photo of Linda Riordan Linda Riordan Llafur, Halifax

If Members have no further questions for these witnesses, I thank the panel on behalf of the Committee.